The Risk-Off Backdrop and the Logic of Falling Gold
We are currently in a risk-off environment. Gold is down, and gold stocks are down with it. The mechanism behind this is worth spelling out carefully, because most observers consider only half of it. Higher US interest rates lead to a higher US dollar. Since gold is denominated in dollars, you must weigh both the numerator and the denominator when thinking about the gold price. Given that dynamic, it would not be surprising for gold to falter in the face of higher interest rates rather than rise.
A crucial caveat sits beneath this: as a country, we cannot actually afford real interest rates. That tension is the heart of the entire thesis.
Is the Bottom In for Precious Metals?
A direct question worth answering: Is the bottom in for precious metals? The honest answer is: not necessarily. I am not convinced the low is in. My suspicion is that nominal interest rates will continue to rise until the current administration loses its courage and forces them back down. As long as nominal rates climb, the dollar stays strong and gold stays under pressure.
But the contradiction is structural. We cannot afford real interest rates because of what they do to the system. The interest burden on the US debt is enormous. If rates continue higher, they will decimate the long bond market precisely when the US government needs to refinance. The damage then cascades into equity markets, consumer durable markets, and the housing market. Eventually — exactly as happened at the end of 1975 — the political class and the voters will lose their nerve. They will sacrifice the sanctity of the US dollar to the demands of domestic politics. When that pivot happens, gold becomes the beneficiary.
Will that occur in 2026? I have no earthly idea. Will it occur at all? Absolutely. The timing is unknowable; the eventual outcome is not. The deeper truth here is that governments dependent on refinancing eventually collide with the cost of defending their own currency. Savers who fixate only on spot prices risk missing the policy pivot that, historically, changes everything.
Reading Hyperbolic Charts and the Discipline of Selling Into Euphoria
There is wisdom in stepping back when a market goes vertical. Earlier this year at a resource investment conference, a panel of experienced investors — the old vanguard of the sector — told the crowd plainly: "We've seen this movie before. The price action has gotten crazy. This is a mania that's going to end soon, and we're reducing our exposure." That message drew enormous criticism. The crowd didn't want to hear bad news; they were convinced this was the long-awaited repricing, a permanent revaluation rather than a cycle. Selling silver near $75 on the way up attracted a great deal of scorn at the time. With hindsight, the discipline proved correct.
The pattern is reliable enough to act on. Whenever I do something, it is immediately unpopular — and I am invariably proven right. When you see a hyperbolic chart, it almost always resolves. Vertical moves do not end by going sideways. The Canadians call this a hockey-stick chart, and the back side of a hockey stick is just as steep as the front side — only it is a lot less fun if you happen to be long. I am not a trader, but when I see a hyperbolic chart, whether pointing up or down, I bet against it; I simply can't help myself. In this particular case, I also had the fundamentals on my side.
The most dangerous phase of a bull market arrives when investors stop asking what the price already assumes. Parabolic moves rarely end with orderly consolidation, and that fact matters far more than sentiment surveys or social-media conviction. When experienced capital reduces exposure into euphoria, retail investors often mistake that discipline for betrayal. Wealth destruction usually begins the moment investors confuse a repricing thesis with immunity from cycles.
What I'm Actually Doing With My Own Money
A natural question follows: What is Rick Rule doing right now in precious metals — just holding, nibbling, or staying away? The answer has two distinct halves.
On physical gold, I am a systematic saver. Whenever I have a liquidity event, I put some of the proceeds into gold. I expect to make a fair bit of money from an upcoming conference, and some of that will go into gold. That is simply what I do — I save systematically in gold and I am fairly price-insensitive about it.
On gold stocks, I am now taking on more risk. This is the key shift: I am doing the opposite of what I advised a year ago. A year ago, the counsel was to emphasize the biggest and the best — the majors. Now I am deploying new money into the riskiest part of the sector.
To be precise about this: I am not lightening up on the majors. I am currently making good money, and I am deploying new money into the riskiest names. The amount of capital I have exposed isn't increasing dramatically — I already have a great deal exposed — but the risk profile of the incremental money is changing dramatically.
The reasoning is mechanical, not reckless. In a risk-off environment, the stocks that have fallen the most are precisely those perceived as riskiest. At the same time, after two and a half years of increased exploration spending, genuinely great exploration results are starting to appear. I am seeing drill holes that deliver spectacular data — yet when the market reacts to such news, it moves nowhere near the way it used to. So the opportunity is not bigger exposure but different exposure: shifting incremental capital toward assets that have been punished harder than their fundamentals justify. The exploration spending has already occurred, yet valuations still imply disappointment. The lesson for those protecting wealth isn't chasing risk for its own sake — it's understanding where fear has become mechanically priced in. (Where exactly that riskiest, most opportune part of the sector lies is a topic best explored in depth at the upcoming Rule Symposium.)
Oil: Supply Shocks, Reflexivity, and Whether We're Headed in the Right Direction
The world has chronically underinvested in exploration and, sooner or later, will have to "get religion" about producing far more energy if it wants to power the future. Then a war arrived that nobody expected, cutting off roughly 20% of the world's oil flow overnight.
Is this reflexive — that is, did the net exporters go into overdrive when 20% of global supply got caught up in the Gulf, and is that pulling forward the investment the world needed to make anyway? Could the crisis, by exposing geopolitical risk, actually benefit the world by accelerating the process? The framing is right in spirit. Supply shocks never create shortages out of nothing; they expose years of ignored underinvestment all at once. Conflict matters less for its own sake than for what it accelerates beneath the surface — namely, capital allocation. Markets rediscover energy security only after price forces them to pay attention, even though the underinvestment signals existed long before the headlines. Investors who wait for certainty typically enter only after the economics have already changed.
On the practical question of whether new investment is following: we do need to accelerate it. The United States currently has a temporary surplus of natural gas, much of it produced as a byproduct of oil. We can export that gas as liquefied natural gas — and when US "oil" exports are totaled, they aren't really oil; they're mostly natural gas. The US had some spare capacity; Venezuela had some spare capacity, which it is now beginning to pull on. But neither the US nor Venezuela has made the sustaining capital investments required to keep that going.
Are we headed in the right direction — for instance, are we creating the conditions for sustainable investment in Venezuela, whose fields were poorly tapped until the Maduro era, recognizing it can't change overnight? Not yet. That correction has not begun there.
In the United States, the picture is more encouraging. Oil at around $90 makes a whole swath of tier-two locations economically viable. In the Permian Basin and the Delaware Basin, you are now seeing many previously stacked rigs turning again — turning in response to today's prices, and turning because operators can now sell their associated gas. That is happening, and it is very beneficial.
The Real Signal: CapEx Over Buybacks
You will know the world has truly received the message when analysts start telling companies to reduce share buybacks, reduce the percentage of free cash flow going to dividends, and increase the share of free cash flow devoted to lifting oil production three, four, and five years out. In other words, stop cannibalizing the future to subsidize shareholders today, and start thinking about shareholder returns several years from now. When that shift occurs, you'll know the message has landed. Right now it is not occurring — except at a handful of companies like Exxon.
Is it not occurring because shareholders are demanding to get paid now, or because management is thinking that way? Producers are always rear-looking. That's simply how the industry works: your opinion of the future is set by your experience in the immediate past.
The investment insight here is that Wall Street celebrates buybacks because future production doesn't appear in next quarter's earnings. The real signal isn't the strength of the oil price — it's whether capital stops rewarding extraction and starts rewarding replacement. Companies that return cash while starving future supply create temporary investor comfort and long-term scarcity. Savers should watch CapEx budgets far more closely than televised price targets.
Inventories, the Cure for High Prices, and Uneven Demand Destruction
There is a loud warning, associated with commodity specialist Jeff Currie of Goldman Sachs, that global inventories have been drawn down so low that even if the Strait of Hormuz reopens quickly and oil flows again through the Gulf, the shockwave of having depleted supplies could keep prices much higher for much longer than the market expects. Is that view correct? On the specific inventory call, I defer to Mr. Currie — he has been a market student at Goldman Sachs for a very long time and is the better pundit on that question, whereas I am a rock hound; we have different areas of expertise.
What I will say is this: the cure for high prices is high prices. At current oil prices, the effect on near-term US demand is modest — but the same prices obliterate demand in markets that cannot afford them. My suspicion is that the marginal buyer — the buyer who actually sets the price — will be forced to boycott energy. If the price of gasoline rises in Reno, you curse, then start your car and drive anyway. If the price of gasoline rises in Colombo, Sri Lanka, the taxi driver simply parks his cab. It is an entirely different response.
The people who determine commodity prices are often the first people forced out of the market. Demand destruction is not evenly distributed: wealthier economies absorb shocks, while marginal buyers disappear. That creates an illusion of resilience — right up until inventories tighten and prices stay elevated far longer than expected. Investors who focus only on domestic conditions can miss where global pricing pressure actually originates. The market's assumption of fast normalization may rest on demand that no longer exists.
The AI and Data-Center Buildout: Pick a Big Market
For the global scramble to build out compute and data centers, which commodities sit at the top of the list — is it copper, natural gas as a bridge fuel, nuclear via SMRs? From an investment-theme standpoint, the critical rule is that you must pick a big market. The danger of small commodities — titanium, vanadium, and the like — is that you can make a great deal of money on the right side of a boom, but then a single large new deposit comes online, cracks the market, and you get your portfolio kicked when supply suddenly increases and the technology works. So to play this game successfully, you need large markets: energy or copper.
The truth is that if the AI scenario plays out, and the demographic trends expected over the next 20 years also occur, then copper — a great big market — will do extraordinarily well. And there is essentially nothing we can do to alter copper supply within a reasonable time frame. The only way to lower copper prices is to have a depression. Listeners who genuinely fear a depression should avoid the copper market until one arrives. But for anyone who believes we will muddle through — with or without AI, and particularly with AI — copper is a no-brainer.
Markets are pricing AI as if it were software, ignoring that the binding constraint may turn out to be rock, steel, and electricity. The opportunity isn't necessarily in exotic materials but in markets too large to be disrupted overnight. The contradiction is that investors chase the newest technology while underestimating the oldest constraint: physical supply. If compute demand compounds faster than extraction capacity, portfolios built around digital abundance may discover commodity scarcity instead.
The Surprise Winner: Uranium
The genuine surprise winner of these discussions has to be uranium, with a near-certain case behind it. It isn't merely that AI will require prodigious amounts of power — it's that AI requires uninterruptible power. That rules out wind and solar; it demands 24/7 baseload, which uranium provides. On top of that, the AI elite also wants non-carbon-generating power, which uranium again offers.
History reinforces the point. The unsung beneficiary of the conflict around the Strait of Hormuz is, in a sense, the same dynamic that played out before. The Arab oil embargo of 1973 was the impetus for the greatest nuclear buildout in history. The French nuclear fleet — now the world's fourth largest — was built as a direct consequence of France's insecurity about importing foreign energy. The Japanese fleet, the third largest, was born of the same circumstance. It was even stated in the Japanese Diet that uranium is the only fuel on earth with sufficient energy density that Japan could store enough energy in a single warehouse to power "Japan Inc." for five years.
The concept of geopolitical energy security has returned to our collective consciousness after a 50-year absence. For a nation insufficient in energy resources — which describes most nations in the world — the only material with enough energy density to solve the problem is uranium. You cannot store that much coal, that much oil, or that much liquefied natural gas; you certainly can't store that much wind or sunshine. It is only uranium.
Does this manifest in 2026? Probably not. Does it manifest over the next five or ten years? Yes — absent a Chernobyl- or Fukushima-style catastrophe. What is the probability that uranium is the fuel of the AI business? It is 100%.
The broader lesson: the energy-transition story changes fast once reliability matters more than messaging. AI demand and energy security may be converging into the same trade after decades of being treated as separate concerns. Institutions publicly emphasize flexibility and diversification while quietly rediscovering dense, dependable baseload power. Investors waiting for official consensus often miss the repricing phase created by infrastructure decisions that are already underway.
Existing Plants vs. Small Modular Reactors
Of that future uranium demand, how much will come from existing conventional nuclear plants versus a brand-new fleet of smaller reactors — SMRs — with different technologies, smaller footprints, moderated safety risks, and the ability to provide on-site power generation without grid dependency, deployable almost anywhere in the world? The honest framing is that SMRs are not nearly as futuristic as they sound.
I once embarrassed myself at a conference by describing SMRs as "the technology of the future," only for a gentleman in the audience to raise his hand and point out: "Mr. Rule, that future has been operated by the US Navy for 25 years." He was right — that is exactly what a submarine is: a small modular reactor in service. The future demand will be driven by all kinds of technology, both existing plants and new designs.
The point is that the biggest investment themes often look obvious only after the infrastructure already exists in plain sight. Investors may be overestimating invention and underestimating deployment. Small modular reactors feel futuristic, yet compact nuclear systems have operated for decades in environments where failure was never an option. For long-term capital preservation, the question isn't which technology ultimately wins — it's which supply chains benefit regardless of branding. And in every one of these scenarios, the supply chain runs back to uranium.
